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No News Is Bad News for Acacia Investors Seeking End to Dispute

(Bloomberg) -- Acacia Mining Plc plunged to a four-year low after the miner forecast sharply lower output and gave no indication it’s closer to resolving a year-long fight with the Tanzanian government.

Acacia isn’t even at the table as controlling shareholder Barrick Gold Corp. negotiates on its behalf. The company hasn’t received any new details since the preliminary agreement Barrick announced four months ago, interim Chief Executive Officer Peter Geleta said on Monday. Acacia also canceled its dividend.

Barrick intends to provide Acacia with a detailed proposal for review and approval by June, he said.

Acacia desperately needs Tanzania to lift a ban on exports of mineral concentrates introduced last March, which forced the company to stockpile output and curb mining at one of its three mines in the country. Revenue dropped 29 percent last year, while cash reserves shrunk and Acacia forecast output will be about 40 percent lower in 2018, suggesting it’s not expecting a quick resolution.

"The Tanzania situation overshadows everything else at this stage," Andrew Breichmanas, an analyst at BMO Capital Markets Ltd., said by phone. It was surprising that Acacia didn’t have more of an update on progress in resolving the dispute, he said.

Acacia dropped by nearly half last year as a result of the drawn-out public dispute. The shares fell as much as 19 percent Monday to the lowest level since September 2013, and traded 9.9 percent lower at 2:17 p.m. in London.

Barrick, which entered Tanzania in 1999, struggled to manage costs and community relations and spun off the business to create African Barrick Gold Plc -- later renamed Acacia -- a decade later. Barrick owns 64 percent of Acacia after reducing its original holding in 2014.

Barrick took the lead on negotiations with Tanzania last year and Acacia said in July it wouldn’t participate directly in the talks.

In October, Barrick Chairman John Thornton surprised the market and Acacia management by announcing he’d negotiated a preliminary deal with the government. That included a $300 million “show of good faith” payment to the government and an agreement to share the economic benefits from the mines, Thornton said.

Acacia, which must approve any deal, said later that day it had only just received a copy of the framework agreement and was seeking further clarification. Two weeks later, the company said CEO Brad Gordon and Chief Financial Officer Andrew Wray had resigned.

The continued lack of clarity around the so-called "framework agreement" is likely to remain an area of concern for investors, Breichmanas said. The export ban saw Acacia lose $264 million in sales across the year, leaving the miner with a cash balance of only $81 million at the end of December.

However, the company’s operational adjustments mean Acacia can survive this year even if a resolution is not found, Geleta said in an interview.

"We are pleased how our people have responded in these difficult circumstances," he said. "We can hold our heads above water and generate cash flow this year even if the concentrate ban is not lifted."